Regulatory

Slovakia: Grid Tariff or Solar Tax?

A support scheme for renewable energy projects in Slovakia is generally guaranteed for 15 years. But from January 2014, a new special fee was introduced, which lowers the main feature of this support – the feed-in tariff.

Renewable energy in Slovakia

Slovakia as a member of the EU is required to increase its use of renewable energy sources (RES) by 2020 to the ratio of 14%. To achieve that, the respective EU legislation was implemented and a comprehensive legal system for promoting the use of RES came into force in Slovakia from 2009. This support scheme is based mainly on a fixed feed-in tariff, guaranteed for each generator of electricity from RES for 15 years following the plant being put into operation.

This support scheme was the main reason for the fast development of many RES projects in 2010 and 2011, especially in the solar sector. However, the government feared that such fast development would lead to an unstoppable “El Dorado” and to an unstable electricity grid, and thus development of mainly solar facilities for profit was effectively stopped in July 2011. Nevertheless, the RES facilities put into operation earlier are still guaranteed high feed-in tariffs for next 11-12 years.

New special grid tariff

In autumn 2013 the regulator (Regulation Office for Network Industries; RONI) effectively decreased this feed-in tariff by introducing a new special fee via secondary legislation. This special fee means that, from January 2014, a generator of electricity must pay a levy (the so-called G-tariff or G-component) to the system operator for reserved capacity of its energy facilities within the transmission or distribution system. Note that all energy generator are subject to the G-tariff, not only those using RES

This special levy is, in case of connection to a distribution network, ca EUR 16,000 to EUR 21,000 (depending on distribution system operator) per MW per year in 2014. This means that support for the RES projects was in fact decreased by ca 5% through the G-tariff. The amount of the G-tariff is set by RONI separately for each year, so changes of the amount are possible.

Legal issues with the G-tariff

Since its introduction, the G-tariff has been widely criticised (also the European Commission has expressed its concerns). It is argued that it is in fact a “solar tax” to lower governmental support for RES facilities. RONI replies that this fee is just a way for electricity generators to participate in the costs of development and maintenance of the electricity grid and is not focused on RES facilities, since it is also paid by electricity generators from conventional sources. So in the eyes of the RONI, this fee is just a grid charge, not a solar tax in disguise.

Still, electricity generators, especially from solar projects, are using all available legal options to fight the fee. The G-tariff has been challenged on the level of RONI and is also subject to various litigation proceedings, including before the Slovak Constitutional Court. The latter seems the most promising “defence mechanism” as it could lead to the abolishment of the G-tariff from the legislation.

The G-tariff is being challenged on the national level for the following main reasons:

  • contradiction with the energy legislation, especially with the provisions guaranteeing the feed-in tariff for the whole period of the incentive scheme (15 years);
  • infringement of a constitutionally guaranteed protection of private property;
  • breach of the principle of legal certainty or legitimate reasonable expectations of the operators of solar plants (the Slovak Constitutional Court has well-developed case-law prohibiting retroactive changes to legislation); and
  • the legislative process was not carried out procedurally as required by law, and the G-tariff was introduced only by a secondary legislation.

In addition to the options under Slovak law, there are also further options to fight on the international level. For instance, the European Commission may start an infringement proceeding against Slovakia. Or investors could use bilateral treaties on protecting investments (BIT), which Slovakia has concluded with various countries.

Outlook

Support schemes in various EU member states were amended as a reaction to the solar (or generally RES) boom. Some of these countries (eg, Spain) used a drastic approach, while others were more sophisticated, to “survive” legal challenges by electricity producers.

It remains to be seen whether the Slovak G-tariff will also pass such test. But the introduction of this fee, and its nature, might indeed be breaching several principles of the law, especially legal certainty. It will thus be interesting to see how the Slovak courts and authorities deal with it.

The introduction of this fee, and its nature, might indeed be breaching several principles of the law, especially legal certainty. It will thus be interesting to see how the Slovak courts and authorities deal with it.